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Dewey's Decline And The Rise Of High-Risk Big Law

Publication Date: 
May 15, 2012
Source: 
CNN - Money
Author: 
Elizabeth G. Olson

Professor Robert Gordon spoke with CNN Money's Elizabeth G. Olson on Dewey & LeBoeuf's downfall and how other law firms could possible follow suit.

As top-drawer New York law firm Dewey & LeBoeuf teeters on the edge, likely to fall from high-paid grace, its closely chronicled decline is providing a look into how the once genteel, clubby world of law firms has morphed into a risk-taking, entrepreneurial industry.

"Dewey may be an extreme example," says Robert Gordon, a Stanford Law School professor who is writing a book on the country's legal profession. "But it may also be an example of something that is happening a lot. Law firms have expanded at a greater rate than other businesses. Some have loaded on debt and made promises of compensation that they can't keep."

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"Dewey may be an extreme example," says Robert Gordon, a Stanford Law School professor who is writing a book on the country's legal profession. "But it may also be an example of something that is happening a lot. Law firms have expanded at a greater rate than other businesses. Some have loaded on debt and made promises of compensation that they can't keep."

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As recently as the early 1980s, "being a law firm partner was prestigious, but it was not a way to get rich," recalls Stanford's Gordon. Law firms began to shed their romantic cloak of "service and craft above the mores of the marketplace" as demand for legal services accelerated in the 1970s, he adds.

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Partner fees have skyrocketed as "lawyers who were involved in big financial deals saw bankers taking big fees," says Gordon. "Salary envy is what it is," he says. "They call it scoreboard salaries."

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Gordon and other legal industry experts trace Big Law's unraveling to the late 1970s when such firms "eagerly connived" -- in Gordon's words -- to provide compensation figures to newly launched legal publications like The American Lawyer. That was "flaunting purely commercial criteria of success," Gordon notes. The numbers served as the basis for calculating average profits-per-partner, which led to firm rankings, a development which further commercialized law firms, legal industry scholars say.

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The growing pay gaps, the insertion of lateral partners, and even less loyalty and longevity among employees have all turned firms into "loose confederations," Gordon concludes. And "partners these days are more like free agents."